But research shows that just 1% of the population has learned and mastered the art of acquiring wealth. This small group understands what most people don’t; they understand risks involved in investments and the concept of diversification. They also take note of economic factors that eat into their returns, namely: taxes, inflation and fees.
Below are 5 secrets that the rich do differently from average investors.
1. Cost of investment
Before making that investment decision, understand the cost involved that would ultimately eat into your returns. Broaden your diversification at the lowest possible cost to lower the risk.
By creating a wide investing portfolio you are mitigating the risks involved. Your portfolio could include stocks, bonds, property and commodities, all of which have different risk levels and returns. Also go for portfolios that don’t turn over quickly to lower taxes.
2. Do your due diligence
Do your research on the investment opportunities available, the internet is a good source as well as investment brokers. When buying stocks, go for stocks with the lowest price – the internet has information on the lowest a particular stock has fallen. Pick on those closest to the bottom. Lowest stock prices are more likely to go up rather than further down.
3. Understand your risk tolerance
Rich investors know how much they want to earn and just how much they can afford to lose at the end of a particular period of time. This is important as it will enable you to put your money in the right places and in the right portions.
It is true that high risk investments have high returns, but you also need to know just how much you are comfortable losing. In that case you will invest a smaller percentage of your money in the high risk investments and the bigger percentage in the low risk investments.
4. Do not rush
Before investing in any company, ensure that the company is performing exceptionally well. The indicators are the company’s market capitalization (which has to be at least $50 billion), the dividend yield, the balance sheet liquidity level, and ratios like the working capital and current ratios among other health indicators.
In conclusion, acquiring wealth will require the individual to understand the financial aspect of money. The most crucial concern to maximize returns is to ensure you diversify your investment portfolio while minimizing your costs. The other concern is to avoid panic as this can lead to poor investment decisions. Opt to invest on long term other than short term.
Share this article on social media to educate others on the secrets that will help them in their investment decisions.
For more information visit the link below:
http://www.bankrate.com/rates/safe-sound/bank-ratings-search.aspx?ic_id=story_investing_bank-rates_globalnav
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